Get your business ready for the VAT

Although the VAT is likely to be introduced in 2018, the majority of UAE business don’t seem to be prepared for the challenge ahead.

With the VAT expected to be introduced in the UAE on 1 January 2018, it is striking that a number of industry operators currently seem to have limited awareness of how the VAT will impact their business. With limited time, operators should start now to prepare their businesses for an upcoming change that will bring new challenges.
Here’s what UAE businesses should do to prepare for the VAT:

Phase 2— Design and implement (before the end of 2016)
– Review legislation, when released, to validate the VAT points identified in phase 1—classify transactions for VAT
– Build input tax-credit allocation model
– Agree to requisite IT changes with IT vendor
– Build log to monitor and resolve issues where the law or its application remains unclear
– Log transitional provisions in the long-term contracts register

While the 5% VAT rate will not affect 100 types of staple food and other essential service sectors such as healthcare and education, it will affect a wide range of products, such as electronics, smartphones, cars, jewelry and watches, eating out, and entertainment.
The inflation fears will impact mostly residents with a big appetite for luxury goods, services, and lifestyles, but the VAT will also have an effect on the buying power of tourists, as they will have to pay duty tax again on certain goods in their country of origin.
Dh12 billion is the estimated revenue to be generated by the UAE through the VAT in the first year.